Are you into crypto?
Did you invest in cryptocurrencies or are trading crypto? And have you thought about crypto tax?
Check out this video to find out what tax consequences dealing with cryptocurrencies has for you.
As usual, if you prefer reading, the transcription is right under.
tax treatment for cryptocurrencies
Good afternoon everyone. It’s Irfanali here with RMI Professional Corporation. I hope everyone’s
had a great couple of weeks.
We’re in the middle of personal tax season. So our office is alive and keeping busy which is always great to see. Speaking of personal taxes today I just wanted to talk a little bit about a topic that I’m frequently getting questions about and that is cryptocurrencies.
It is something I chatted about last year a little bit but I know over the past year it’s become a hotter topic amongst a lot of people.
And so I just want to touch base and kind of fill people in what’s the tax treatment for cryptocurrencies.
So first of all CRA does mandate, saying that you do need, to report all your income. That does include any income that you’ve earned from cryptocurrency. And you do need to report that on your personal tax returns unless you’ve got them located through a corporation which I know is becoming more and more doable these days.
So how does the crypto income get treated on your personal tax returns? Here are two ways:
- passive crypto income
If it is a passive investment for you, such as somebody might have bought some Bitcoin or some Ethereum coin and they’ve held it over the last year then it’s simply a capital gain when the transaction occurs.
It is important to know in the cryptocurrencies world that a transaction does occur when you transfer from coin to coin so it’s not only applicable when you take the money back out and convert it to Canadian currency or US dollars but it does even apply when you’re converting from coin to coin.
So if you buy Bitcoin and convert it to Ethereum a transaction has occurred and you need to record your capital gain at that time.
- Active crypto investing
And then some people who are doing a higher level of investing in cryptocurrencies may be doing this as more of their own active business. In that instance then you have to report it as business income.
The same thing applies when a transaction occurs. That income or the gain becomes an income for you. You need to put that into income on your personal tax return and you’ll be taxed on it.
Of course, if you are doing things like mining or staking, those become regular income as well. But you are able to offset expenses. So for example, if you did buy some equipment to do mining then you are able to actually offset some of those expenses against the income that you’re actually earning on that end.